How to treat segment records with missing sic code? 
Posted: 31 July 2013 03:55 PM   [ Ignore ]
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I am calculating sales_based Herfindahl index of focus. Some of the segments reported by Compustat segment file are missing the SIC code? How should I treat these segment observations? Simply drop them seems not a good idea. Thanks!

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Posted: 31 July 2013 09:48 PM   [ Ignore ]   [ # 1 ]
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hi wwfacct,

There is no easy way out. For the Herfindahl index you need to know to which segment the sales belong to.

Things that I can think of:
- count the number of segments that this firm-year has; if it is a single segment firm, you could use the Fundamental Annual (firmlevel) SIC (or historic SICH; SIC is never missing)
- drop the segment from the analyses (easiest)
- prorate this segment sales to other segments with non-missing SIC for that firm (probably not the best option in your case)

By the way, there are several other things ‘wrong’ with the segment files.
- many firms in Compustat Fundamental Annual are not in the segment dataset
- even for firms that have a single segment, the SIC of that segment often does not match the SIC in Fundamental Annual
- the sum of the segment sales (or assets) should add up to the sales (or assets) in Funda, but often it doesn’t

Hope this helps,

Joost

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Posted: 31 July 2013 10:02 PM   [ Ignore ]   [ # 2 ]
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Thanks! Joost.

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